Economic and Financial Review - June 2019

June 2019 Economic and Financial Review ANTIGUA AND BARBUDA

private homes on Barbuda, as well as the port redevelopment project. Private sector construction activity for the remainder of the year will include CIP-funded real estate and tourism developments. Inflationary pressures may intensify, as geopolitical tensions escalate, which could stoke global crude oil prices. However, no significant movement is expected in the real exchange rate of the EC dollar as inflationary outcomes in the ECCU are not projected to deviate significantly from that of its major trading partners. Developments in the burgeoning education sector are also likely to further sustain this growth momentum. The anticipated opening of the University of the West Indies’ fourth landed campus in Five Islands in September 2019 is also expected to enhance overall economic activity, through increased demand for housing, transport and other consumer-related spending. The fiscal position of the government is likely to further deteriorate in light of a number of announced initiatives. In particular, the overall deficit is projected to widen, driven by increased outlays for the operations of the Five Islands campus, 1 the

anticipated expansion in capital expenditure along with lower revenue intake from continued concessions to facilitate the opening of the new campus. These fiscal developments are likely to be partly mitigated by the anticipated gains from the improvements in tax administration and the implementation of initiatives to improve tax compliance such as the enactment of the updated Tax Administration and Procedures Act. This improvement is likely to be further boosted by an increase in receipts from the CIP, in keeping with the trends observed in the first half of the year. In the external sector, the merchandise trade deficit is projected to widen in line with the higher volume of imports to support the enhanced construction activity and increased domestic demand associated with the operations of the UWI campus. Despite the buoyant projection, the outlook for 2019 is subject to some notable downside risks, which may require monitoring. With respect to external developments, the International Monetary Fund (IMF) has projected that global economic growth may weaken in 2019. In its July 2019 update of the World Economic Outlook, the Fund

11 While the government has introduced the Income Tax (Amendment) Bill 2019 to help fund the operations of the campus, the tax is unlikely to yield the required revenue in the initial period.

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Eastern Caribbean Central Bank